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v A U.S. car manufacturer with Canadian dollar receivables v The Federal Reserve Bank of New York conducts a successful Open E Market Sale of $100,000 worth of government securities Specialization and Trade (3 Since October 23, 1995, the country ofjordan has xed its currency, the dinar, at 1 dinar =1.41044 dollars (1 US. dollar = 0.709 dinar). H Increase in the money supply didn't decrease the interest rate rendering " monetary policy ineffective J The Federal Reserve lowered the required reserve ratio from 15% to 12% K. The total amount the Federal government owes its creditors L. v "U.S. Ination Rate Hit 6Year High in May" reads a headline for The Wall Street Journal article M V The Federal Reserve prints $10,000 and gives it to Mrs. Cash. The N required reserve ratio is 10% "General Motors and Volkswagen have invested billions in China, starting more than a decade ago. Ford is rushing to catch up by adding production capacity and expanding its dealer network in China. Ford and itsjoint- P venture partner, Chang'an Ford Mazda Automobile, plan to start producing nextgeneration Ford Focus models at a new, $490 million plant in Chongqingin 2012." --Forbes Q. From the list on your right select the letter that contains the word, phrase, name, etc that best matches the word, phrase,name, etc listed on the left. Hard exchange rate peg Can use hedging to minimize the risk ofthe currency depreciating relative to the U.S. dollar and hurting the company's revenues. . Example of Foreign Direct Investment . Benets ifthe US. dollar appreciates relative to Canadian dollar . Examples of the dollarization of China's currency: the renminbi yuan. The simple money (deposit) multiplier rises from 6.57% to 8.33% . The money supply declines by at least $100,000 . Investors are insensitive to changes in interest rate Budget Decit . Floating exchange rate Allow countries to consume at a level beyond their Production Possibilities Frontier Require a countw to be more efficient than others (Absolute advantage is necessary) . Crowding-out effect . Generates a maximum of $9, 000 deposit in the banking system Will likely lead to the deprectiation ofthe US. dollar due to a decrease in demand and an increase in supply Leads to the appreciation of U.S. dollar encouraging portfolio investors to ' hold more of it Hurt a country if it is a net importer The money supply increases by a maximum of $100,000 and a minimum of $10,000 National (public) debt Liquidity trap